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EXHIBIT 10.6
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EXCO ENERGY INVESTORS, L.L.C.
(a Delaware limited liability company)
LIMITED LIABILITY COMPANY AGREEMENT
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THE SECURITIES EVIDENCED BY THIS LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACT. NO
TRANSFER OF ANY SECURITIES MENTIONED HEREIN SHALL BE PERMITTED UNTIL THE
TRANSFEROR SHALL HAVE COMPLIED WITH ALL RESTRICTIONS ON TRANSFER SET FORTH
HEREIN AND SUCH SECURITIES HAVE BEEN REGISTERED UNDER SUCH ACTS OR UNTIL THE
BOARD OF MANAGERS OF THE COMPANY SHALL HAVE RECEIVED A FAVORABLE OPINION FROM
THE COMPANY'S LEGAL COUNSEL, OR FROM LEGAL COUNSEL ACCEPTABLE TO THE BOARD OF
MANAGERS, TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER
SUCH ACTS.
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EXCO ENERGY INVESTORS, L.L.C.
LIMITED LIABILITY COMPANY AGREEMENT
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS............................................................................................1
1.1 DEFINITIONS..............................................................................................1
1.2 CONSTRUCTION.............................................................................................4
ARTICLE II. ORGANIZATION..........................................................................................4
2.1 FORMATION................................................................................................4
2.2 NAME.....................................................................................................4
2.3 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE IN THE UNITED STATES; OTHER OFFICES...............4
2.4 PURPOSES.................................................................................................5
2.5 FOREIGN QUALIFICATION....................................................................................5
2.6 TERM.....................................................................................................5
2.7 NO STATE-LAW PARTNERSHIP.................................................................................6
2.8 MERGERS AND EXCHANGES....................................................................................6
ARTICLE III. MEMBERSHIP, DISPOSITIONS OF INTERESTS................................................................6
3.1 MEMBERS..................................................................................................6
3.2 RESTRICTIONS ON THE DISPOSITION OF AN INTEREST...........................................................6
3.3 ADDITIONAL MEMBERS.......................................................................................8
3.4 INFORMATION..............................................................................................8
3.5 LIABILITY TO THIRD PARTIES...............................................................................9
3.6 WITHDRAWAL...............................................................................................9
3.7 LACK OF AUTHORITY........................................................................................9
ARTICLE IV. CAPITAL CONTRIBUTIONS.................................................................................9
4.1 CAPITAL CONTRIBUTIONS....................................................................................9
4.2 RETURN OF CONTRIBUTIONS.................................................................................10
4.3 ADVANCES BY MEMBERS.....................................................................................10
4.4 CAPITAL ACCOUNTS........................................................................................11
ARTICLE V. ALLOCATIONS AND DISTRIBUTIONS.........................................................................11
5.1 ALLOCATIONS.............................................................................................11
5.2 TIME OF ALLOCATION......................................................................................12
5.3 DISTRIBUTIONS...........................................................................................12
5.4 WITHHOLDING.............................................................................................14
ARTICLE VI. BOARD OF MANAGERS....................................................................................14
6.1 MANAGEMENT..............................................................................................14
6.2 NUMBER AND QUALIFICATIONS...............................................................................15
6.3 ELECTION AND TERM.......................................................................................15
6.4 DESIGNATION OF MEMBERS OF THE BOARD OF MANAGERS.........................................................15
6.5 VACANCY.................................................................................................15
6.6 REMOVAL.................................................................................................15
6.7 PLACE OF MEETINGS.......................................................................................15
6.8 ANNUAL MEETINGS OF MANAGERS.............................................................................15
6.9 SPECIAL MEETINGS OF THE BOARD OF MANAGERS...............................................................16
6.10 QUORUM..................................................................................................16
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6.11 ATTENDANCE AND WAIVER OF NOTICE.........................................................................16
6.12 COMPENSATION OF MANAGERS................................................................................16
6.13 STANDARDS AND CONFLICTS. ..............................................................................16
6.14 AGENTS, OFFICERS AND EMPLOYEES..........................................................................17
6.15 RELIANCE................................................................................................17
6.16 COMMITTEE OF MANAGERS...................................................................................17
6.17 OTHER COMMITTEES........................................................................................17
6.18 ACTIONS WITHOUT A MEETING AND TELEPHONIC MEETINGS.......................................................17
ARTICLE VII. MEETING OF MEMBERS..................................................................................18
7.1 MEETINGS................................................................................................18
7.2 APPROVAL OR RATIFICATION OF ACTS OR CONTRACTS BY MEMBERS................................................18
7.3 ACTIONS WITHOUT A MEETING AND TELEPHONIC MEETINGS.......................................................19
ARTICLE VIII. INDEMNIFICATION....................................................................................19
8.1 INDEMNIFICATION.........................................................................................19
8.2 ADVANCE PAYMENT.........................................................................................20
8.3 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS.......................................................20
8.4 APPEARANCE AS A WITNESS.................................................................................20
8.5 NONEXCLUSIVITY OF RIGHTS................................................................................20
8.6 INSURANCE...............................................................................................20
8.7 MEMBER NOTIFICATION.....................................................................................21
8.8 SAVINGS CLAUSE..........................................................................................21
ARTICLE IX. TAXES................................................................................................21
9.1 TAX MANAGER.............................................................................................21
9.2 TAX RETURNS.............................................................................................21
9.3 TAX ELECTIONS...........................................................................................21
ARTICLE X. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS............................................................22
10.1 MAINTENANCE OF BOOKS....................................................................................22
10.2 REPORTS.................................................................................................22
10.3 ACCOUNTS................................................................................................22
ARTICLE XI. BANKRUPTCY OF A MEMBER...............................................................................22
11.1 BANKRUPT MEMBERS........................................................................................22
ARTICLE XII. DISSOLUTION, LIQUIDATION, AND TERMINATION...........................................................23
12.1 DISSOLUTION.............................................................................................23
12.2 LIQUIDATION AND TERMINATION.............................................................................23
12.3 DEFICIT CAPITAL ACCOUNTS................................................................................24
12.4 CERTIFICATE OF CANCELLATION.............................................................................24
12.5 RETURN OF CONTRIBUTION NON-RECOURSE TO OTHER MEMBERS....................................................24
ARTICLE XIII. GENERAL PROVISIONS.................................................................................24
13.1 OFFSET..................................................................................................24
13.2 NOTICES.................................................................................................24
13.3 ENTIRE AGREEMENT; SUPERSEDURE...........................................................................25
13.4 EFFECT OF WAIVER OR CONSENT.............................................................................25
13.5 AMENDMENT OR MODIFICATION...............................................................................25
13.6 BINDING EFFECT..........................................................................................25
13.7 ARBITRATION.............................................................................................25
13.8 GOVERNING LAW; VENUE; SEVERABILITY......................................................................26
13.9 FURTHER ASSURANCES......................................................................................26
13.10 WAIVER OF CERTAIN RIGHTS................................................................................27
13.11 NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT.......................................................27
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13.12 COUNTERPARTS............................................................................................27
EXHIBIT A - Names, Addresses, Commitments and Sharing Ratios of Initial Members
EXHIBIT B - Counsel Designees
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EXCO ENERGY INVESTORS, L.L.C.
LIMITED LIABILITY COMPANY AGREEMENT
This LIMITED LIABILITY COMPANY AGREEMENT OF EXCO ENERGY
INVESTORS, L.L.C. (the "Company"), dated as of October 9, 1998 (this
"Agreement"), is made and entered into by and among those persons constituting
the Class A Members and those persons constituting the Class B Members, each as
set forth on Exhibit "A" hereto and is executed by an authorized representative
of each such Member to accept the rights and obligations as a Member hereunder.
ARTICLE I.
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
terms have the following meanings:
"AFFILIATE" means a specified Person that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
For purposes of this definition, "control" shall mean the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" means this Limited Liability Company Agreement, as
the same may be amended from time to time hereafter.
"BANKRUPTCY" or "BANKRUPT" means, in respect of any Person,
the occurrence of any of the following with respect to such Person:
1. such Person shall (i) voluntarily consent to an order for
relief by filing a petition for relief under the laws of the United
States codified as Title 11 of the United States Code, (ii) seek,
consent to, or not contest the appointment of a receiver, custodian, or
trustee for itself or for all or any part of its property, (iii) file a
petition seeking relief under the bankruptcy, arrangement,
reorganization, or other debtor relief laws of any state or other
competent jurisdiction, or (iv) make a general assignment for the
benefit of its creditors; or
2. (i) a petition is filed against such Person seeking an
order for relief under the laws of the United States codified as Title
11 of the United States Code, or seeking relief under the bankruptcy,
arrangement, reorganization, or other debtor relief laws of the United
States or any state or other competent jurisdiction, or (ii) a court of
competent jurisdiction enters an order, judgment or decree appointing,
without the consent of such Person, a receiver, custodian, or trustee
for it, or for all or any part of its property, and such petition,
order, judgment or decree shall not be and remain discharged or stayed
within sixty (60) days after its entry.
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"BOARD OF MANAGERS" means a board comprised of two Managers
elected by the Class A Members and one Manager elected by the Class B
Members, which, as of the date hereof, shall be comprised of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, respectively. The
Board of Managers shall also include any other Persons who are elected
to act as additional members of the Board of Managers as provided
herein. Action may be taken or approval given by the Board of Managers
(as provided in this Agreement or otherwise) at any given time upon the
approval of a majority of the members of the Board of Managers then in
office.
"CAPITAL ACCOUNT" has the meaning assigned to such term in
Section 4.4 of this Agreement.
"CAPITAL CONTRIBUTION" means any contribution by a Member to
the capital of the Company including, without limitation, monies and
the Contribution Value of any securities contributed in kind
contributed by such Member to the Company in connection with costs,
expenses, fees and any other funds requested by the Company.
"CERTIFICATE" has the meaning given that term in Section 2.1.
"CLASS A MEMBER" means those Members on "Exhibit A" hereto
listed as Class A Members.
"CLASS B MEMBER" means those Members on "Exhibit A" hereto
listed as Class B Members.
"CODE" means the Internal Revenue Code of 1986 and any
successor statute, as amended from time to time.
"COMPANY" means EXCO Energy Investors, L.L.C., a Delaware
limited liability company.
"CONTRIBUTION DUE DATE" has the meaning assigned to such term
in Section 4.1(b) of this Agreement.
"CONTRIBUTION VALUE" has the meaning assigned to such term in
Section 4.1(b) of this Agreement.
"DELAWARE ACT" means the Delaware Limited Liability Company
Act, and any successor statute, as amended from time to time.
"DISPOSE," "DISPOSING" or "DISPOSITION" means a sale,
assignment, transfer, exchange, mortgage, pledge, grant of a security
interest, or other disposition or encumbrance (including, without
limitation, by operation of law), or the acts thereof.
"EXCO" means EXCO Resources, Inc., a Texas corporation.
"FISCAL YEAR" means the Company's fiscal year, which shall be
the calendar year, unless subsequently changed by the Board of
Managers.
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"GENERAL INTEREST RATE" means a varying rate per annum that is
equal to the interest rate publicly quoted by Bank of America National
Trust and Savings Association, from time to time as its prime
commercial or similar reference interest rate, with adjustments in that
varying rate to be made on the same date as any change in that rate.
"MANAGER" means a Person appointed by the Members in
accordance with this Agreement to the Board of Managers at any given
time.
"MEMBER" means all Persons listed on Exhibit "A" hereto,
whether Class A Members or Class B Members or otherwise, who have
executed this Agreement as of the date of this Agreement as a member of
the Company or any Person who hereafter is admitted to the Company as a
member as provided in this Agreement, but does not include any Person
who has ceased to be a member in the Company.
"MEMBERSHIP INTEREST" means the interest of a Member in the
Company, at any particular time, including, without limitation, rights
to distributions (liquidating or otherwise), allocations, information,
and to consent or approve.
"OCM" means OCM Principal Opportunities Fund, L.P. and any of
its Affiliate successors.
"OPERATING EXPENSE" means the costs, expenses or charges
incurred by the Company in owning and holding its assets and operating
the business of the Company, including without limitation, taxes,
interest and third-party debt amortization, insurance premiums,
repairs, maintenance, salaries or other compensation, professional
fees, wages, utility costs and all other expenses incurred in the
day-to-day operation of the Company's business.
"PERMITTED TRANSFEREE" means (a) with respect to EXCO and its
direct or indirect wholly-owned subsidiaries, a direct or indirect
wholly-owned subsidiary of EXCO, but only for so long as such Person
continues to be a direct or indirect wholly-owned subsidiary of EXCO,
(b) with respect to OCM and its Affiliates, any Person, including, but
not limited to, any Affiliate of OCM (including limited partners
thereof), and (c) with respect to any Member other than EXCO and its
wholly-owned direct or indirect subsidiaries or OCM and its Affiliates,
a direct or indirect wholly-owned subsidiary of such Member.
"PERSON" means an individual, partnership, limited liability
company, corporation, joint venture, trust, employee benefit plan,
unincorporated association, or other entity or association.
"PROFITS" and "LOSSES" means, for each Fiscal Year or other
period, an amount equal to the Company's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following
adjustments:
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(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses shall be added to taxable income or loss;
(ii) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(1) of the Treasury
Regulations, and not otherwise taken into account either in computing
Profits or Losses or under clause (iii) below shall be subtracted from
such taxable income or loss; and
(iii) Any income, gain, fees and expenses specially allocated
pursuant to Section 5.1(b) and (e) and Section 5.4 shall not be taken
into account in computing Profits or Losses.
"SECURITIES ACT" means the United States Securities Act of
1933, as amended.
"SHARING RATIO" with respect to any Member that holds
Membership Interests, means the applicable percentage stated opposite
such Member's name on Exhibit "A" (except as adjusted pursuant to
Sections 3.3 and 3.6). Reference in this Agreement to a Member's
Sharing Ratio shall mean such Member's Sharing Ratio at the time of
determination.
"TAX MANAGER" has the meaning given that term in Section 9.1
of this Agreement.
Other terms defined herein have the meanings so given them.
1.2 Construction. Whenever the context requires, the gender of
all words used in this Agreement includes the masculine, feminine, and neuter.
All references to Certificate and Sections refer to articles and sections of
this Agreement, and all references to Exhibits are to Exhibits attached hereto,
each of which is made a part hereof for all purposes.
ARTICLE II.
ORGANIZATION
2.1 Formation. The Company has been organized as a Delaware
limited liability company by the filing, as of October 9, 1998, of a Certificate
of Formation (the "CERTIFICATE") under and pursuant to the Delaware Act.
2.2 Name. The name of the Company is "EXCO Energy Investors,
L.L.C." and all Company business must be conducted in that name or such other
names that comply with applicable law as the Board of Managers may select from
time to time.
2.3 Registered Office; Registered Agent; Principal Office in
the United States; Other Offices. The registered office of the Company required
by the Delaware Act to be maintained in the State of Delaware shall be the
office of the initial registered agent named in the Certificate or such other
office (which need not be a place of business of the Company) as the Board of
Managers may designate from time to time in the manner provided by law. The
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registered agent of the Company in the State of Delaware shall be the initial
registered agent named in the Certificate or such other Person or Persons as the
Board of Managers may designate from time to time in the manner provided by law.
The principal office of the Company in the United States shall be at such place
as the Board of Managers may designate from time to time, which need not be in
the State of Delaware. The initial principal office of the Company shall be at
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The Company may have such
other offices as the Board of Managers may designate from time to time.
2.4 Purposes. The purposes of the Company is to (a) invest in
the purchase of assets, bonds, notes, bank debt, royalty interests and equity
securities of companies or other businesses engaged in the exploration,
development, production, distribution, marketing or refining of oil or natural
gas in North America; (b) engage in any other business or activity that now or
hereafter may be necessary, incidental, proper, advisable, or convenient to
accomplish the foregoing purposes and that is not forbidden by the law of the
jurisdiction in which the Company engages in that business; and (c) to carry on
any other lawful business, purpose or activity; provided, however, that all
investments must be approved by the Board of Managers. The Company shall have
any and all powers necessary or desirable to carry out the purposes and business
of the Company, to the maximum extent permitted by applicable law and may engage
in such purposes or business directly or through one or more branch offices or
other business entities as the Board of Managers deems necessary or desirable to
do business in the designated jurisdiction.
2.5 Foreign Qualification. Prior to the Company's conducting
business in any jurisdiction other than Delaware, the Board of Managers shall
cause the Company to comply, to the extent procedures are available and those
matters are reasonably within the control of the Board of Managers, with all
requirements necessary to qualify the Company as a foreign limited liability
company in that jurisdiction. At the request of the Board of Managers, each
Member shall execute, acknowledge, swear to, and deliver all certificates and
other instruments conforming with this Agreement that are necessary or
appropriate to qualify, continue, and terminate the Company as a foreign limited
liability company in all such jurisdictions in which the Company may conduct
business.
2.6 Term. The Company commenced on the date of the filing of
the Certificate with the Secretary of State of the State of Delaware and shall
continue in full force and effect until the first to occur of (a) September 30,
1999, (b) the date upon which ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ceases to be the Chief Executive
Officer of EXCO or (c) a Change of Control of EXCO. Notwithstanding the
foregoing, OCM shall have the option to extend the term of existence of the
Company for successive three (3) month-periods until September 30, 2001.
For purposes of this Section 2.6, a "Change of Control" shall have occurred (a)
if any Person or group (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder) other
than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (together with his Affiliates) or OCM (together with its
Affiliates) owns more than 35% of the common stock or 35% of the voting
securities of EXCO, (b) if during any consecutive 12-month period, individuals
at the beginning of any such 12-month period who constituted the Board of
Directors of EXCO (together with any new directors whose election by the Board
of Directors of EXCO or whose nomination for election by the directors of EXCO
was approved by a vote
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of a majority of the directors of EXCO then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute at least
66-2/3% of the directors of EXCO then in office, (c) if ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ceases
to own at least 400,000 shares of EXCO common stock (as such number may be
further adjusted for stock splits, divisions or combinations) or (d) upon
Bankruptcy of EXCO.
2.7 No State-Law Partnership. The Members intend that the
Company not be a partnership (including, without limitation, a limited
partnership) or joint venture, and that no Member be a partner or joint
venturer of any other Member, for any purposes other than federal and state tax
purposes, and this Agreement may not be construed to suggest otherwise. This
Section 2.7, however, does not prohibit a Member, in his or its individual or
independent capacity, from being associated with another Member in another
partnership, venture or entity.
2.8 Mergers and Exchanges. The Company may be a party to a
merger or consolidation as described in Section 18-209 of the Delaware Act;
provided however, that all Members shall vote as a single class for such
purposes and shall not be deemed to be part of separate classes or groups.
ARTICLE III.
MEMBERSHIP, DISPOSITIONS OF INTERESTS
3.1 Members. The Members of the Company are the Persons
executing this Agreement as of the date of this Agreement as Members as set
forth on "Exhibit A" hereto, each of which is admitted to the Company as a
Member or whose prior admission as a Member is reconfirmed effective
contemporaneously with the execution by such Person of this Agreement.
3.2 Restrictions on the Disposition of an Interest. (a) Except
as specifically provided in this Section 3.2, a Disposition of a Membership
Interest by a Member may not be effected. Any attempted Disposition by a Person
of a Membership Interest, or any part thereof, in or in respect of the Company
other than in accordance with this Section 3.2 shall be, and is hereby declared,
null and void ab initio.
(b) Notwithstanding the provisions of Section 3.2(a) but
subject to the other provisions of this Section 3.2, the interest of any Member
in the Company may be transferred without the consent of the Board of Managers
or any of the Members if the transferee is a Permitted Transferee.
(c) The Company may not recognize for any purpose any
purported Disposition of all or part of a Membership Interest unless and until
the other applicable provisions of this Section 3.2 have been satisfied and the
Board of Managers has received, on behalf of the Company, a document (i)
executed by both the Member effecting the Disposition (or if the transfer is on
account of the death, incapacity, or liquidation of the transferor, its
representative) and the Person to which the Membership Interest or part thereof
is Disposed, (ii) including the notice address of any Person to be admitted to
the Company as a Member and its agreement to be bound by this Agreement in
respect of the Membership Interest or part thereof being obtained, (iii)
setting forth the Sharing Ratios after the Disposition of the Member effecting
the
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Disposition and the Person to which the Membership Interest or part thereof is
Disposed (which together must total the Sharing Ratio of the Member effecting
the Disposition before the Disposition), and (iv) containing a representation
and warranty that the Disposition was made in accordance with all applicable
laws and regulations (including securities laws) and, if the Person to which
the Membership Interest or part thereof is Disposed is to be admitted to the
Company, such representations and warranties with respect to that Person as the
Board of Managers reasonably requests. Each Disposition and, if applicable,
admission complying with the provisions of this Section 3.2(c) is effective as
of the first day of the calendar month immediately succeeding the month in
which the Board of Managers receives the notification of Disposition and the
other requirements of this Section 3.2 have been met.
(d) For a Member to Dispose of a Membership Interest or any
part thereof, or of any Person to be admitted to the Company in connection
therewith, to exist or be exercised, (i) either: (A) the Membership Interest or
part thereof subject to the Disposition or admission must be registered under
the Securities Act of 1933, as amended, and any applicable state securities laws
or (B) the Company must receive a favorable opinion of the Company's legal
counsel or of other legal counsel acceptable to the Board of Managers to the
effect that the Disposition or admission is exempt from registration under those
laws, and (ii) the Company must receive a favorable opinion of the Company's
legal counsel or of other legal counsel acceptable to the Board of Managers to
the effect that the Disposition or admission, when added to the total of all
other sales, assignments, or other Dispositions within the preceding 12 months,
would not (y) result in the Company's being considered to have terminated within
the meaning of the Code or (z) cause the Company to be treated as a publicly
traded partnership within the meaning of Section 7704 of the Code. The Board of
Managers, however, may waive the requirements of this Section 3.2(d).
(e) The Member effecting a Disposition and any Person admitted
to the Company in connection therewith shall pay, or reimburse the Company for,
all costs incurred by the Company in connection with the Disposition or
admission (including, without limitation, the legal fees incurred in connection
with the legal opinions referred to in Section 3.2(d)) on or before the tenth
day after the receipt by that Person of the Company's invoice for the amount
due.
(f) Notwithstanding any of the other provisions of this
Agreement, if a transferee or assignee of an interest in the Company is not
admitted as a Member of the Company for any reason, such transferee or assignee
is only entitled to receive the share of profits and distributions that the
transferor or assignor would have otherwise been entitled. Additionally, such
transferee or assignee that is not admitted as a member shall have no right to
participate in the management of the Company.
(g) The personal representative (or other
successor-in-interest) of a deceased Member shall succeed to the deceased
Member's interest in the Company. However, such personal representative (or
other successor in interest) shall not be entitled to be admitted as a Member
without the consent of each other Member in its sole discretion.
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(h) A Member that is not a natural person may not cause or
permit an interest, direct or indirect, in itself to be Disposed if, after the
Disposition, the Company would be considered to have terminated within the
meaning of Section 708 of the Code.
3.3 Additional Members. Additional Persons may be admitted to
the Company as Members and Membership Interests may be created and issued to
those Persons and to existing Members on such terms and conditions as may be
approved by the Board of Managers prior to such admissions. The terms of
admission or issuance must specify the Sharing Ratios applicable thereto and may
provide for the creation of different classes or groups of Members and having
different rights, powers, and duties, and further providing for appropriate
adjustments, if any, in the Members' Capital Accounts and to the definition of
"Profits and Losses" in this Agreement. The Members shall reflect the creation
of any new class or group in an amendment to this Agreement indicating the
different rights, powers, and duties, and such an amendment need be executed
only by a majority of the Board of Managers. Any such admission also must comply
with the provisions of Sections 3.2(c) and is effective only after the new
Member has executed and delivered to the Board of Managers a document including
the new Member's notice address and its agreement to be bound by this Agreement.
The provisions of this Section 3.3 shall not apply to Dispositions of Membership
Interests.
3.4 Information. (a) In addition to the other rights
specifically set forth in this Agreement each Member is entitled to all
information to which that Member is entitled to have access pursuant to Section
18-305 of the Delaware Act under the circumstances and subject to the conditions
therein stated; provided however, that to the extent not prohibited by the
Delaware Act all such rights shall terminate immediately upon such Members'
termination as a Member with respect to all such information regardless of the
time period to which it relates.
(a) The Members acknowledge that, from time to time, they may
receive information from or concerning the Company in the nature of trade
secrets or that otherwise is confidential, the release of which may damage the
Company or Persons with which it does business. Each Member shall hold in strict
confidence any information that it receives concerning the Company that is
identified as being confidential (and if that information is provided in
writing, that is marked "confidential") and may not disclose it to any person
other than another Member, except for disclosures (i) compelled by law (but the
Member must notify the other Members promptly of any request for that
information before such disclosure if permitted by law), (ii) to advisers or
representatives of the Member or Persons to whom that Member's Membership
Interest may be Disposed as permitted by this Agreement, but only if the
recipients have agreed to be bound by the terms of this Section 3.4(b), or (iii)
of information that the Member also has received from a source independent of
the Company that the Member reasonably believes obtained that information
without breach of any obligation of confidentiality. The Members acknowledge
that breach of the provisions of this Section 3.4(b) may cause irreparable
injury to the Company for which monetary damages are inadequate, difficult to
compute, or both. Accordingly, the Members agree that the provisions of this
Section 3.4(b) may be enforced by specific performance.
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3.5 Liability to Third Parties. None of the Board of Managers,
the Managers or any Member shall be liable for the debts, obligations or
liabilities of the Company or of any other Member, including under a judgment
decree or order of a court.
3.6 Withdrawal. No Member may retire, resign or withdraw from
the Company.
3.7 Lack of Authority. No Member, acting in its capacity as a
Member, has the authority or power to act for or on behalf of the Company, to do
any act that would be binding on the Company, or to incur any expenditures on
behalf of the Company.
ARTICLE IV.
CAPITAL CONTRIBUTIONS
4.1 Capital Contributions. (a) Initial Capital Contributions.
Prior to the execution of this Agreement, each Member has contributed cash to
the Company in the following amounts (as to each, "INITIAL CAPITAL
CONTRIBUTION"), and on the execution of this Agreement, each Member shall
receive its Membership Interests in the corresponding amounts:
Member Contribution Initial Membership Interest
------ ------------ ---------------------------
OCM $657,596.59 95%
EXCO $ 34,610.35 5%
(b) Additional Capital Contributions. If the Board of Managers
determine that the amounts contributed to the Company by the Members with regard
to the Initial Capital Contributions are insufficient to carry out the purposes
of the Company, then on approval of and within three (3) days of receipt of
notice (the "CONTRIBUTION DUE DATE") provided by the Board of Managers, the
Members shall make additional Capital Contributions (for which each Member shall
be responsible for its pro rata share thereof) to the Company, not to exceed an
aggregate total of $50,000,000 (including the Initial Capital Contributions of
the Members), unless a higher total is otherwise approved unanimously by the
members of the Board of Managers of the Company. A Member may contribute to the
Company in satisfaction of all or a part of its additional Capital
Contributions, if consistent with the purposes of this Company and approved by
Board of Managers, securities purchased by such Member on behalf of the Company,
the value of which (the "CONTRIBUTION VALUE") shall be equal to the price paid
to purchase such securities, plus (i) any commissions or expenses (legal or
otherwise) incurred by such Member in connection with such purchase or transfer
of such securities to the Company and (ii) interest on the price paid to
purchase the securities, inclusive of funds paid in respect of accrued interest
or dividends thereon (and on any expenses incurred or commissions paid in
connection with such purchase), computed at a 15% annual rate (net of any
liabilities actually assumed by the Company and liabilities to which such
contributed property is subject).
(c) Remedies for Failure to Fund Additional Capital
Contributions. If the Board of Managers calls for additional Capital
Contributions in accordance with Section 4.1(b) above and one or more Members
fail to make their required additional Capital Contribution within
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three (3) days after delivery of notice to such party(ies), then the following
shall occur (unless waived in writing by the non-defaulting Members):
(i) if one but not all of the Class A Members fails to so fund
its additional Capital Contribution, then the Class B Member(s) shall
permit the other Class A Members to fund such defaulting Class A
Member's portion (with such proportionate adjustments to the applicable
Membership Interests and Sharing Ratios as determined by the Class A
Members); if the Class A Members collectively continue to fail to
fulfill their additional Capital Contribution(s) past the Contribution
Due Date, then the defaulting Class A Member shall pay interest to the
Company on the amount of such additional Capital Contribution equal to
the greater of 10% or the General Interest Rate per annum from the
Contribution Due Date until such deficit amount is paid in full; and
(ii) if any of the Class B Members fail to so fund their
additional Capital Contribution within fifteen (15) days from its
Contribution Due Date and each of the Class A Members have funded their
additional Capital Contribution(s) by the Contribution Due Date, then,
until such date as the defaulting Class B Member funds its additional
Capital Contribution, the Class A Members shall be entitled to purchase
from such defaulting Class B Member such Member's Membership Interests
for consideration equal to the lesser of the actual price paid by such
Class B Member for its Membership Interests (less any distributions
made to such Class B Member on such interest) or the fair market value
of such Class B Member's Membership Interest. For purposes of this
subsection, "fair market value" shall mean the value of cash and
securities together that would be distributed to such Member upon
liquidation as set forth in Section 12.2(a)(iii) and (b) of this
Agreement; and
(iii) if any Class B Member fails to so fund its additional
Capital Contribution by its Contribution Due Date (unless such Class B
Member's Membership Interest is purchased pursuant to paragraph (ii)
above), then such defaulting Member shall pay interest to the Company
on the amount of such additional Capital Contribution equal to the
greater of 10% or the General Interest Rate per annum from the
Contribution Due Date until such deficit amounts are paid in full.
4.2 Return of Contributions. A Member is not entitled to the
return of any part of its Capital Contributions or to be paid interest in
respect of either its Capital Account or its Capital Contributions. An unrepaid
Capital Contribution is not a liability of the Company or of any Member. A
Member is not required to contribute or to lend any cash or property to the
Company to enable the Company to return any Member's Capital Contributions.
4.3 Advances by Members. If the Company does not have
sufficient cash to pay its obligations, any Member(s) that may agree to do so
with the Board of Managers' consent may advance all or part of the needed funds
to or on behalf of the Company. An advance described in this Section 4.3 shall
constitute a loan from the Member to the Company, shall bear interest at a rate
equal to the greater of (a) 10% or (b) the General Interest Rate, in either case
from the date of the advance until the date of payment, is not a Capital
Contribution and shall be subject to such other terms and conditions as may be
agreed upon between such Member and the Company.
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4.4 Capital Accounts. (a) A Capital Account ("CAPITAL
ACCOUNT") shall be established for each Member and shall equal the Capital
Contribution of the Member, as adjusted for any allocations of Profit made to
the Member pursuant to Section 5.1 and any special allocations of income and
gain, minus all cash and the value on the date of distribution of other assets
distributed to the Member (net of any liabilities actually assumed by such
Member and liabilities to which such distributed property is subject) and minus
any allocation of Losses made to the Member pursuant to Section 5.1 and any
special allocation of expenses.
(b) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treasury Regulation Section 1.704-1(b) and shall be interpreted and applied
in a manner consistent with such Treasury Regulation, except that no such
interpretation or application shall adversely affect the economic interest of
any Member. In the event the Member shall determine that it is prudent to modify
the manner in which the Capital Accounts, or any debits or credits thereto, are
computed or any item entering the definition of Profit or Loss is allocated in
order to comply with such Treasury Regulation, the Tax Manager may make such
modification, or amend this Agreement, if and to the extent that the amendment
or modification does not materially adversely affect the economic interests of
any Member. If unanticipated events might otherwise cause this Agreement not to
comply with such Treasury Regulation, the Tax Manager may amend this Agreement
or otherwise modify the procedures employed by the Tax Manager without the
approval of any Member if and to the extent that the amendment or other
modification does not materially adversely affect the economic interests of any
Member.
ARTICLE V.
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations. The Profits and Losses of the Company, as the
case may be, and each item of income, loss and deduction or credit entering into
the computation thereof, for each Fiscal Year shall be allocated as follows:
(a) After effecting the allocations provided for in
subparagraphs (b), (d) and (f) below, Profits and Losses as computed for book
accounting purposes for any Fiscal year shall be allocated among the Member in
such manner that, as of the end of such Fiscal Year, the sum of (i) the Capital
Account of each Member, (ii) such Member's share of "minimum gain" (as
determined according to Treasury Regulation Sections 1.704-2(g)) and (iii) such
Member's "partner nonrecourse debt minimum gain" (as defined in Treasury
Regulation Section 1.704-2(i)(3)) shall be equal to the respective net amount,
positive or negative, that would be distributed to such Partner or for which
such Partner would be liable to the Partnership under this Agreement, determined
as if the Partnership were to (x) liquidate the assets for an amount equal to
their book value (i.e., an amount that generated no further Profits or Losses),
(y) pay the liabilities of the Partnership from the proceeds of such liquidation
and (z) distribute the remaining proceeds of such liquidation pursuant to
Section 5.3.
(b) Prior to making the allocations provided for in subsection
(a), the Board of Managers may make such allocations as it believes reasonably
necessary to comply with Treasury Regulations Section 1.704-1(b) and 1.704-2
(including, without limitation, the "minimum gain chargeback," "partner
nonrecourse debt" and "qualified income offset"
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provisions of such regulations). If the Board of Managers makes any allocations
pursuant to this subsection (b), the Board of Managers may make offsetting
allocations so that the net allocations to any Member shall, to the extent
possible, be the same as the allocations that would have been made pursuant to
subsection (a) without regard to this subsection (b).
(c) Subject to Code Section 704(c), all items of taxable
income, gain, loss and deduction or credit shall be allocated to the Partners in
accordance with the corresponding allocations of Profit, Loss, income and
expense made pursuant to this Section 5.1.
(d) If any asset is distributed in kind, the difference
between its fair market value (determined in accordance with Section 5.3(a)) and
the value at which it is carried on the Partnership's books at the time of such
distribution shall, for the purpose of maintaining Capital Accounts, be treated
as an item of Profit or Loss and allocated pursuant to the terms of Section 5.1.
(e) Items of tax expense payable by the Company, or withheld
on income received by the Company, shall be allocated to the Members in the same
proportion that the income with respect to which such expense is incurred is
allocated; provided however, that (i) when an item of tax expense payable by the
Company or when a withholding tax on income received by the Company, is
calculated, under applicable law, with respect to income allocable to some (but
not all) of the Members, or, (ii) to the extent income allocable to some of the
Members is exempt from tax in the hands of the Company, such tax expense or
withholding tax shall be allocated, as reasonably determined by the Board of
Managers, only to such Members to whom allocations of income are subject to tax
in the hands of the Company. If income earned by the Company is subject to tax
in the hands of the Company with respect to income allocable to some, but not
all, of the Members, the Board of Managers shall either (i) distribute on a
current basis to Members whose allocable shares of income from the Company are
not subject to tax in the hands of the Company, such reduction in tax payable by
the Company, or (ii) make other appropriate adjustments to distributions to the
Members.
5.2 Time of Allocation. The allocations in Section 5.1 shall
be made as of the end of each Fiscal Year of the Company, and any other date the
Board of Managers believes is necessary to correctly reflect the economic
relations of the Board of Managers. The Board of Managers shall use reasonable
efforts to determine and allocate all Profits and all Losses of the Company with
respect to each Fiscal Year within 90 days after the end of each Fiscal Year.
5.3 Distributions. (a) From time to time (but at least once
each calendar year), the Board of Managers shall determine in its judgment to
what extent (if any) the Company's cash on hand or other property exceeds its
current and anticipated needs, including, without limitation, for Operating
Expenses, debt service, acquisitions, and a contingency reserve. If such an
excess exists, the Board of Managers shall cause the Company to distribute an
amount of cash equal to such excess to those Members who have made all Capital
Contributions properly requested by the Board of Managers in accordance with
Section 4.1 hereof in the following priorities:
First, until Class A Members realize a IRR (as defined below)
of 15%, distributions from the Company shall be allocated 95%
to the Class A Members and 5% to Class B Members;
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Second, after Class A Members have realized a IRR of 15%, and
until Class A Members realize a IRR of 25%, distributions from
the Company shall be allocated 80% to Class A Members and 20%
to Class B Members; and
Third, after Class A Members have realized a 25% IRR, all
distributions shall be allocated 75% to Class A Members and
25% to Class B Members.
No Member shall be entitled to receive any distributions from the Company unless
such Member has made all Capital Contributions properly requested by the Board
of Managers in accordance with Section 4.1 hereof. For purposes of this Section
5.3(a), "IRR" for a Member shall mean the nominal internal rate of return
calculated on a daily basis over the period from the date of the initial Capital
Contribution by such Member to the date in question. IRR shall be determined
based upon cash or property contributed by the Class A Members to the Company
(valued at their Contribution Value as of the date of such contribution) and
cash or property distributed by the Company to the Class A Members (valued as of
the date of distribution); provided, however, that if distributions other than
cash are made to the Members, such distributions shall be valued at the time of
distribution as follows, unless the Board of Managers reasonably determines in
good faith that the result derived from the following formulae differs
materially from the fair market value (as determined by unanimous vote of the
Managers of the Company appointed by OCM and EXCO or, if such Managers are
unable to collectively make such determination, by an independent
nationally-recognized appraiser appointed by the Managers) of such security or
property as of the date of distribution:
(i) Debt (if such debt has been 95% of the quoted market price
traded within the preceding ten of such debt on the last day
trading days): such debt was traded prior to
the date of determination,
together with accrued interest
owing thereon;
(ii) Debt (if such debt is 95% of the face amount of the
nonpublic bank debt or secured debt, together with accrued
debt that has not been traded interest owing thereon;
within the preceding ten trading
days, but is current as to
interest payments and is not
otherwise in default):
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(iii) Registered equity securities: 85% of the quoted market price
on the last day on which such
securities were traded; and
(iv) Unregistered equity At the fair market value
securities or other securities (determined in accordance with the
or assets preceding paragraph), giving
effect to illiquidity and
transferability discounts.
(a) No distribution shall be declared and paid unless after
the distribution is made, the assets of the Company are in excess of all
liabilities of the Company (as determined in accordance with accounting
principles applied on a consistent basis), except liabilities to Members on
account of their Capital Contributions.
5.4 Withholding. The Tax Manager is hereby authorized to
withhold, out of any distributions that would otherwise be made to any Member,
an amount equal to the amount of foreign or United States federal, state or
local payments, that the Tax Manager determines the Company or the Tax Manager
is required to withhold or to pay to a taxing authority with respect to or on
behalf of such Member, and to file all necessary reports relating to such
withholding or payment as may be required by law; provided however, that the Tax
Manager shall actually distribute such amounts to the extent there is a
subsequent determination that the amount withheld (and not yet remitted) is not
owed to any taxing authority. Any amounts so withheld or paid shall be deemed
actually distributed to such Member for all purposes of this Agreement.
Notwithstanding the foregoing, if any such amounts are deemed for tax purposes
to be a Company deduction or expense, the amount of any such deduction or
expense shall be specially allocated to the pertinent Member. If at any time (x)
the amount required to be withheld or paid by the Company or the Tax Manager
with respect to or on behalf of any such Member shall exceed (y) the amounts
that are then available for distribution to such Member, the Tax Manager shall
notify such Member of the amount of such excess, and such Member (whether or not
it is then a Member) shall promptly pay over to the Tax Manager cash equal to
such amount. Each Member shall indemnify the Company and the Tax Manager and
their respective affiliates and members and hold each of them harmless from any
liability with respect to any taxes, penalties or interest required to be
withheld or paid to any taxing authority by the Company or the Tax Manager for
or on behalf of such Member or with respect to such Member. If any entity
taxable as a partnership in which the Company invests requires the Company to
make any payments or reduces distributions to the Company because of such
entity's withholding obligations, the Company may reduce distributions to or
request reimbursement from such of its Members as were indirectly responsible
for the payment to or the withholding by such entity, taking into account the
extent to which the withholding was affected by special characteristics (such as
nationality) of such Members.
ARTICLE VI.
BOARD OF MANAGERS
6.1 Management. Except for situations in which the approval of
the Members is required under this Agreement, the Delaware Act or otherwise by
applicable law,
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(a) the powers of the Company shall be exercised by or under the authority of,
and the business and affairs of the Company shall be wholly managed under the
direction of, the Board of Managers; and (b) the Board of Managers may make all
decisions and take all actions for the Company not otherwise provided for in
this Agreement. In managing the business and affairs of the Company and
exercising its powers, the Board of Managers shall act (x) collectively through
meetings or written consents, (y) through committees pursuant to Section 6.16 or
(z) through a Manager or Managers to whom authority and duties have been
delegated to such Person as the Board of Managers may deem advisable.
6.2 Number and Qualifications. The number of Managers
appointed to the Board of Managers shall not be less than one nor more than
five, as the Members holding a majority of the Membership Interests may
determine from time to time, but no decrease in the number of Managers shall
shorten the term of an incumbent Manager. Managers need not be Members or
residents of the State of Delaware. The Managers may elect a chairman of the
Board of Managers who shall preside at meetings of the Board of Managers.
6.3 Election and Term. At the first annual meeting of the
Members, and at each annual meeting thereafter, the Members shall elect the
Managers to serve on the Board of Managers in accordance with the terms of this
Agreement. Unless removed in accordance with this Agreement, the Managers shall
hold office until their successors are elected or appointed and qualified, or
until their earlier death, resignation or removal. Each Manager shall hold
office until resignation or removal in accordance with this Agreement. A Manager
may resign at any time by giving notice to the Members. Such resignation shall
be made in writing and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the last Member to receive such
resignation.
6.4 Designation of Members of the Board of Managers. The Class
A Members hereby designate and appoint ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
to the Board of Managers. The Class B Members hereby designate and appoint
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to the Board of Managers.
6.5 Vacancy. Any vacancy occurring for any reason in the
number of Managers comprising the Board of Managers shall be filled by the
approval of a majority of the Members or otherwise in accordance with the
Delaware Act (but in each case in accordance with the terms of this Agreement
providing for Class A Members to elect two Managers and Class B Members to elect
one Manager to the Board of Managers). A Manager elected to fill a vacancy shall
be elected for the unexpired term of the predecessor in office.
6.6 Removal. At a meeting called expressly for the purpose,
all or any lesser number of Managers may be removed at any time, with or without
cause, by the approval of a majority of the class of Members (e.g., Class A
Members) electing such Manager.
6.7 Place of Meetings. All meetings of the Board of Managers
may be held either within or without the State of Delaware.
6.8 Annual Meetings of Managers. The annual meeting of
Managers shall be held, without further notice, immediately following the annual
meeting of Members, and at the
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same place, or at such other time and place as shall be fixed by Members holding
a majority of the Membership Interests.
6.9 Special Meetings of the Board of Managers. Special
meetings of the Board of Managers may be held at any time upon one day's notice
at a time and place as is from time to time determined by Members holding a
majority of Membership Interests or by any Manager then in office.
6.10 Quorum. At all meetings of the Board of Managers, the
presence of a majority of the Managers shall be necessary and sufficient to
constitute a quorum for the transaction of business unless a greater number is
required by applicable law. Subject in all events to the limitation on actions
that may be taken by the Board of Managers, the act of a majority of the
Managers present at a meeting at which a quorum is present shall be the act of
the Board of Managers, except as otherwise provided by applicable law, the
Certificate or this Agreement. If a quorum is not present at any meeting of the
Board of Managers, the Managers present at the meeting may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum is present.
6.11 Attendance and Waiver of Notice. Attendance of a Manager
at any meeting constitutes a waiver of notice of the meeting, except where a
Manager attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any meeting of the Board of Managers need be specified in the notice or
waiver of notice of a meeting.
6.12 Compensation of Managers. Managers, as members of the
Board of Managers, shall not receive any stated salary for their services, but
shall receive such compensation for their services as may be from time to time
approved by Members holding a majority of the Membership Interests. In addition,
a fixed sum and expenses of attendance, if any, may be allowed for attendance at
each meeting of the Board of Managers. This Agreement shall not be construed to
preclude any Manager from serving the Company in any other capacity and
receiving compensation for such service. In addition, the Managers shall be
entitled to be reimbursed for out-of-pocket costs and expenses incurred in the
course of their service hereunder, excluding any portion of their overheard
allocable to Company activities.
6.13 Standards and Conflicts. (a) Each Manager shall be liable
for errors or omissions in performing his or her duties with respect to the
Company only in the case of bad faith, gross negligence, or breach of the
provisions of this Agreement but not otherwise. The Managers shall devote such
time and effort to the Company business and operations as is necessary to
promote fully the interests of the Company; however, neither any Manager nor any
Member must devote full time to Company business.
(a) Subject to the other express provisions of this Agreement,
the Managers, each Member and each officer of the Company at any time and from
time to time may engage in and possess interests in other business ventures of
any and every type and description, independently or with others with no
obligation to offer to the Company or any Member or officer of the Company the
right to participate therein.
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(b) The Company may transact business with any Managers, any
Member, or officer or Affiliate thereof, provided the terms of those
transactions are no less favorable than those the Company could obtain from
unrelated third parties and the terms of those transactions are approved by the
Board of Managers; and provided, further, that to the extent that it is
commercially reasonable to explore transactions (of any kind) between EXCO and
the Company (other than as specifically contemplated by this Agreement), the
Board of Managers will consider such a transaction, although neither EXCO, OCM
or the Company shall be required to effectuate such a transaction without
approval of each of EXCO, OCM and the Company.
6.14 Agents, Officers and Employees. The Board of Managers
may, from time to time, designate one or more Persons to be agents or officers
of the Company and may hire other employees for the Company. No agent, officer
or employee need be a resident of the State of Delaware, a Member or a Manager.
Any agents or officers so designated shall have such authority and perform such
duties as the Board of Managers may, from time to time, delegate to them. The
Board of Managers may assign titles to particular agents and officers. The
agents and officers shall not be entitled to compensation for their services as
such, but the agents, officers and other employees shall be entitled to be
reimbursed for out-of-pocket costs and expenses incurred in the course of their
service to the Company and shall be entitled to salaries as employees of the
Company.
6.15 Reliance. Any Person dealing with the Company, other than
a Member, may rely on the authority of any two Managers or agents thereof in
taking any action in the name of the Company without inquiry into the provisions
of this Agreement or compliance herewith, regardless of whether that action
actually is taken in accordance with the provisions of this Agreement.
6.16 Committee of Managers. The Managers may, by resolution,
designate from among the Managers one or more committees, each of which shall be
comprised of one or more Managers, and may designate one or more of the Managers
as alternate members of any committee, who may, subject to any limitations
imposed by the Board of Managers, replace absent or disqualified Managers at any
meeting of that committee. Such committee shall have and may exercise all of the
authority of the Board of Managers, subject to the limitations set forth in the
Delaware Act or in the establishment of the committee by the Board of Managers.
Any members thereof may be removed at any time by majority of the Managers.
6.17 Other Committees. Other committees having and exercising
the authority of the Board of Managers in the management of the Company may be
designated by a resolution adopted by a majority of the Managers. Except as
otherwise provided in such resolution, members of each such committee shall be
appointed by the Board of Managers. Any members thereof may be removed by a
majority of the Board of Managers whenever in its judgment the best interests of
the Company shall be served by such removal.
6.18 Actions Without a Meeting and Telephonic Meetings.
Notwithstanding any other provision contained in this Article, all actions of
the Board of Managers may be taken by written consent without a meeting so long
as such consent is then delivered to all Managers, or any meeting thereof may be
held by means of a conference telephone, provided that the
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requisite number of Managers consents thereto or participates therein and notice
of the actions taken is provided to any Managers not in attendance.
ARTICLE VII.
MEETING OF MEMBERS
7.1 Meetings. All meetings of the Members shall be held at the
principal offices of the Company designated in Section 2.3 of this Agreement, or
at such other place within or without the State of Delaware as set forth in the
respective notice or waivers of notice of the meeting.
(a) Annual Meeting of Members. The annual meeting of
Members for the election of Managers and the transaction of other business that
properly comes before the meeting, shall be held at the time and date designated
by the Board of Managers from time to time and stated in the notice of the
meeting. The annual meeting shall be called in the same manner as provided in
this Agreement for special meetings of the Members, except that the purposes of
the meeting need be enumerated in the notice of the meeting only to the extent
required by applicable law.
(a) Special Meetings of Members. Special meetings of Members
may be called by any Manager or by Members holding a majority of the Membership
Interests of the Company.
(b) Notice of Meetings. Written or printed notice stating the
place, day and time of the meeting and, in the case of special meetings, the
purpose of the meeting shall be delivered to each of the Members no later than
five (5) days prior to the meeting date. If mailed, the notice shall be deemed
to be delivered five (5) business days after having been deposited in the United
States mail, addressed to the Member at the Member's address as it appears on
the records of the Company. Failure by a Member to receive such notice shall
have no bearing on the binding nature of actions taking at any meeting so long
as a quorum was present at such meeting.
(c) Quorum. The presence at a meeting of those Members that
hold a majority of Membership Interests constitutes a quorum, but only for those
matters for which the a higher quorum is not required by applicable law. The
Members may not act on matters at a meeting for which a greater affirmative vote
of such Members is required than is present. Once a quorum is present, the
withdrawal from the meeting before adjournment, or the refusal to vote, shall
not affect the presence of a quorum at the meeting. If, or to the extent that, a
quorum is not present at any meeting, then the Members entitled to vote at the
meeting may adjourn or recess the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present.
(d) Member Voting. Each outstanding Membership Interest shall
be entitled to one vote on each matter submitted to a vote for approval by the
Members unless otherwise provided by law.
7.2 Approval or Ratification of Acts or Contracts by Members.
The Board of Managers, in its discretion or as required by the terms of this
Agreement, may submit any act or
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contract for approval or ratification at any annual meeting of the Members, or
at any special meeting of the Members called for the purpose of considering any
such act or contract, and any act or contract that shall be approved or be
ratified by Members holding a majority of the Membership Interests of the
Company shall be as valid and as binding upon the Company and upon all the
Members as if it shall have been approved or ratified by every Member of the
Company. Notice of the next Members' meeting shall be furnished to Members at
least five days before such meeting, provided that any such notice may be waived
by any Member who does not receive such notice and such waiver shall be deemed
given by a Member with respect to any meeting attended by such Member; provided
further that any action that may be taken at an annual or special meeting of the
Members, may be taken without a meeting, without prior notice and without a
vote, if a written consent, setting forth the action so taken, is signed by
Members holding a majority of the Membership Interests.
7.3 Actions Without a Meeting and Telephonic Meetings.
Notwithstanding any other provision contained in this Article, all actions of
the Members provided for herein may be taken by written consent without a
meeting, or any meeting thereof may be held by means of a conference telephone,
provided that the requisite number of Members consent thereto or participates
therein in accordance with the Delaware Act.
ARTICLE VIII.
INDEMNIFICATION
8.1 Indemnification. Subject to the limitations and conditions
as provided in this Article VIII, each person who was or is made a party or is
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative (hereinafter a "PROCEEDING"), or any appeal in such
a Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that he or she, or a Person of whom he or she
is the legal representative, is or was a Manager or Member of the Company or
while a Manager or Member of the Company is or was serving at the request of the
Company as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise shall be indemnified by the
Company to the fullest extent permitted by the Delaware Act, as the same exist
or may hereafter be amended (but in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment) against judgments, penalties (including excise and similar taxes
and punitive damages), fines, settlements and reasonable expenses (including,
without limitation, attorneys' fees) actually incurred by such Person in
connection with such Proceeding, and indemnification under this Article VIII
shall continue as to a Person who has ceased to serve in the capacity which
initially entitled such Person to indemnity hereunder. The rights granted
pursuant to this Article VIII shall be deemed contract rights, and no amendment,
modification or repeal of this Article VIII shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings arising
prior to any such amendment, modification or repeal. It is expressly
acknowledged that the indemnification provided in this Article VIII could
involve indemnification for negligence or under theories of strict liability.
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8.2 Advance Payment. The right to indemnification conferred in
this Article VIII shall include the right to be paid or reimbursed by the
Company the reasonable expenses incurred by a Person of the type entitled to be
indemnified under Section 8.1 who was, is or is threatened to be made a named
defendant or respondent in a proceeding in advance of the final disposition of
the Proceeding and without any determination as to the Person's ultimate
entitlement to indemnification; provided, however, that the payment of such
expenses incurred by any such Person in advance of the final disposition of a
Proceeding, shall be made only upon delivery to the Company of a written
affirmation by such Manager or Member of his or her good faith belief that he
has met the standard of conduct necessary for indemnification under this Article
VIII and a written undertaking, by or on behalf of such Person, to repay all
amounts so advanced if it shall ultimately be determined that such indemnified
Person is not entitled to be indemnified under this Article VIII or otherwise.
8.3 Indemnification of Officers, Employees and Agents. The
Company, by adoption of a resolution of the Members, may indemnify and advance
expenses to officers, employees or agents of the Company to the same extent and
subject to the same conditions under which it may indemnify and advance expenses
to a Manager or a Member under this Article VIII; and the Company may indemnify
and advance expenses to Persons who are not or were not a Manager, a Member,
employees or agents of the Company but who are or were serving at the request of
the Company as a, director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise against any liability asserted
against them and incurred by them in such a capacity or arising out of their
status as such Persons to the same extent that it may indemnify and advance
expenses to a Manager or Members under this Article VIII.
8.4 Appearance as a Witness. Notwithstanding any other
provision of this Article VIII, the Company may pay or reimburse expenses
incurred by a Manager in connection with his appearance as a witness or other
participation in a Proceeding at a time when such Manager is not named defendant
or respondent in the Proceeding.
8.5 Nonexclusivity of Rights. The right to indemnification and
the advancement and payment of expenses conferred in this Article VIII shall not
be exclusive of any other right which a Manager or other Person indemnified
pursuant to Section 8.3 may have or hereafter acquire under any law (common or
statutory), provision of the Certificate or this Agreement, other agreement,
vote of Members or otherwise.
8.6 Insurance. The Company may purchase and maintain
insurance, at its expense, to protect itself and any Person who is or was
serving as a Manager, employee or agent of the Company or is or was serving at
the request of the Company as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic limited liability company, corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise against
any expense, liability or loss, whether or not the Company would have the power
to indemnity such Person against such expense, liability or loss under this
Article VIII.
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8.7 Member Notification. Any indemnification of or advance of
expenses to a Manager or Member in accordance with this Article VIII shall be
reported in writing to the Members with or before the notice or waiver of notice
of the next Members' meeting or with or before the next submission to Members of
a consent to action without a meeting and, in any case, within the 12-month
period immediately following the date of the indemnification or advance.
8.8 Savings Clause. If this Article VIII or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Company shall nevertheless indemnify and hold harmless any Manager or any
other Person indemnified pursuant to this Article VIII as to costs, charges and
expenses (including, without limitation, attorneys' fees and expenses),
judgments, fines and amounts paid in settlement with respect to any action, suit
or proceeding, whether civil, criminal, administrative or investigative to the
full extent permitted by applicable law.
ARTICLE IX.
TAXES
9.1 Tax Manager. OCM is hereby designated the "tax matters
partner" (the "TAX MANAGER") for purposes of Section 6231(a) of the Code (and
regulations thereunder).
9.2 Tax Returns. The Tax Manager shall cause to be prepared
and filed all necessary federal, state and foreign income tax returns for the
Company, including making the elections described in Section
9.3. Each Member shall furnish to the Tax Manager all
pertinent information in its possession relating to Company operations that is
necessary to enable the Company's income tax returns to be prepared and filed.
9.3 Tax Elections. The Tax Manager, on behalf of the Company,
shall make the following elections on the appropriate tax returns:
(a) to adopt the calendar year as the Company's fiscal
year (unless otherwise modified by approval of the Board of Managers),
(a) to adopt the cash method of accounting if permitted by the
Code and to keep the Company's books and records on the income-tax method;
(b) if a distribution of Company property as described in
section 734 of the Code occurs or if a transfer of a Membership Interest as
described in section 743 of the Code occurs, on written request of any Member,
to elect, pursuant to section 754 of the Code, to adjust the basis of Company
properties;
(c) to elect to amortize the organizational expenses of the
Company and the startup expenditures of the Company under section 195 of the
Code ratably over a period of 60 months as permitted by section 709(b) of the
Code; and
(d) any other election the Board of Managers may deem
appropriate and in the best interests of the Members.
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Neither the Company nor the Board of Managers nor a Member may make an election
for the Company to be taxed as a corporation or excluded from the application of
the provisions of subchapter K of chapter 1 of subtitle A of the Code or any
similar provisions of applicable state law, and no provision of this Agreement
shall be construed to sanction or approve such an election. If a distribution or
transfer event described in clause (c) above occurs, the Member requesting an
adjustment of the basis of Company properties shall bear and pay any and all
appraisal costs incurred by the Company in connection with such adjustment.
ARTICLE X.
BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
10.1 Maintenance of Books. The Company shall keep books and
records of accounts. The books of account for the Company shall be maintained on
a cash basis if permitted by the Code in accordance with the terms of this
Agreement. The calendar year shall be the accounting year of the Company.
10.2 Reports. On or before the 120th day following the end of
each fiscal year during the term of the Company, the Board of Managers shall
cause each Member to be furnished with a balance sheet, an income statement, a
statement of changes in Members' capital of the Company, and a statement of cash
flow for, or as of the end of, that year. These financial statements shall be
prepared using the cash basis of accounting (if the Company then utilizes the
cash-basis of accounting) in accordance with accounting practices followed for
United States federal income tax reporting purposes, and also prepared pursuant
to generally accepted accounting principles. The Board of Managers shall select
and retain an independent accounting firm to audit the annual financial
statements and books of the Company, at the cost of the Company. The Board of
Managers shall also furnish unaudited financial statements for the Company for
each of the first three quarters of each fiscal year during the term of the
Company. The Board of Managers also may cause to be prepared or delivered such
other reports as it may deem appropriate. The Company shall bear the costs of
all such reports.
10.3 Accounts. The Board of Managers shall establish and
maintain one or more separate bank and investment accounts and arrangements for
funds of the Company, which accounts shall be in the name of the Company, and
opened with financial institutions that the Board of Managers determines. The
Board of Managers may not commingle the Company's funds with the funds of the
Members or their affiliates.
ARTICLE XI.
BANKRUPTCY OF A MEMBER
11.1 Bankrupt Members. If any Member becomes Bankrupt
("BANKRUPT MEMBER"), the Company shall have the option, exercisable by notice
from the Board of Managers to the Bankrupt Member (or its representative) at any
time prior to the 180th day after receipt of notice of the occurrence of the
event causing it to become a Bankrupt Member, to buy, and on the exercise of
this option the Bankrupt Member or its representative shall sell, its Membership
Interest. The purchase price shall be an amount equal to the fair market value
thereof determined by agreement by the Bankrupt Member (or its representative)
and the Board of Managers; however, if those Persons do not agree on the fair
market value on or before the
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30th day following the exercise of the option, either such Person, by notice to
the other, may require the determination of fair market value to be made by an
independent nationally-recognized appraiser specified in that notice. If the
Person receiving that notice objects on or before the tenth day following
receipt to the independent appraiser designated in that notice, and those
Persons otherwise fail to agree on an independent appraiser, such Person may
designate another independent nationally-recognized appraiser who, with the
initial appraiser, will then together select a third nationally-recognized
independent appraiser to determine the fair market value of the Bankrupt
Member's interest. The determination by such final chosen appraiser shall be
binding on the Members.
ARTICLE XII.
DISSOLUTION, LIQUIDATION, AND TERMINATION
12.1 Dissolution.
(a) The Company shall dissolve and its affairs shall be wound
up on the written consent of the Board of Managers and the consent of a majority
of the Members or otherwise in accordance with the Delaware Act.
(b) As soon as possible following the occurrence of the vote
specified in Section 12.1(a) effecting the dissolution of the Company, the Board
of Managers of the Company shall execute a statement of intent to dissolve in
such form as shall be presented by the Delaware Secretary of State and file same
with the Delaware Secretary of State's office.
12.2 Liquidation and Termination. (a) On dissolution of the
Company, the Board of Managers shall act as liquidator or may appoint one or
more Members as liquidator, or, if the Board of Managers is unavailable for
reasons of death, retirement, resignation, Bankruptcy or any other reason, the
majority of Members may appoint such liquidator. The liquidator shall proceed
diligently to wind up the affairs of the Company and make final distributions as
provided herein and in the Delaware Act. The costs of liquidation shall be borne
as a Company expense. Until final distribution, the liquidator shall continue to
operate the Company properties with all of the power and authority of the Board
of Managers. The steps to be accomplished by the liquidator are as follows:
(i) as promptly as possible after dissolution and again after
final liquidation, the liquidator shall cause a proper accounting to be
made by a recognized firm of independent public accountants of the
Company's assets, liabilities, and operations through the last day of
the calendar month in which the dissolution occurs or the final
liquidation is completed, as applicable;
(ii) the liquidator shall pay, satisfy or discharge from
Company funds all of the debts, liabilities and obligations of the
Company (including, without limitation, all expenses incurred in
liquidation and any advances described in Section 4.3) or otherwise
make adequate provision for payment and discharge thereof (including,
without limitation, the establishment of a cash escrow fund for
contingent liabilities in such amount and for such term as the
liquidator may reasonably determine); and
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(iii) all remaining assets of the Company shall be distributed
in accordance with the Members' Capital Account balances (after
adjusting such Capital Accounts for all Profits and Losses of the
Company for the year of liquidation, including all Profits and Losses
related to liquidation and to distributions in kind pursuant to Section
5.1(d).
(b) All distributions in kind to the Members shall be made
subject to the liability of each distributee for costs, expenses, and
liabilities theretofore incurred or for which the Company has committed prior to
the date of termination and those costs, expenses, and liabilities shall be
allocated to the distributee pursuant to this Section 12.2. The distribution of
cash and/or property to a Member in accordance with the provisions of this
Section 12.2 constitutes a complete return to the Member of its Capital
Contributions and a complete distribution to the Member of its Membership
Interest and all the Company's property and constitutes a compromise to which
all Members have consented. To the extent that a Member returns funds to the
Company, it has no claim against any other Member for those funds.
12.3 Deficit Capital Accounts. Notwithstanding anything to the
contrary contained in this Agreement, and notwithstanding any custom or rule of
law to the contrary, to the extent that the deficit, if any, in the capital
account of any Member results from or is attributable to deductions and losses
of the Company (including non-cash items such as depreciation), or distributions
of money pursuant to this Agreement to all Members in proportion to their
respective Sharing Ratios, upon dissolution of the Company such deficit shall
not be an asset of the Company and such Members shall not be obligated to
contribute such amount to the Company to bring the balance of such Member's
capital account to zero.
12.4 Certificate of Cancellation. On completion of the
distribution of Company assets as provided herein, the Company is terminated,
and the Board of Managers (or such other Person or Persons as the Delaware Act
may require or permit) shall file a certificate of cancellation with the
Secretary of State of Delaware, cancel any other filings made pursuant to
Section 2.5, and take such other actions as may be necessary to terminate the
Company.
12.5 Return of Contribution Non-recourse to Other Members.
Except as provided by law, upon dissolution, each Member shall look solely to
the assets of the Company for the return of such Member's Capital Contribution.
If the Company property remaining after the payment or discharge of the debts
and liabilities of the Company is insufficient to return the cash or other
property contribution of one or more Members, such Member or Members shall have
no recourse against any other Member.
ARTICLE XIII.
GENERAL PROVISIONS
13.1 Offset. Whenever the Company is to pay any sum to any
Member, any amounts that Member owes the Company may be deducted from that sum
before payment.
13.2 Notices. Except as expressly set forth to the contrary in
this Agreement, any notices, requests, or consents provided for or permitted to
be given under this Agreement must be in writing and must be given either by
depositing that writing in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested
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29
or by delivering that writing to the recipient in person, by courier, or by
facsimile transmission; and a notice, request, or consent given under this
Agreement is effective on receipt by the Person to receive it. All notices,
requests, and consents to be sent to a Member must be sent to or made at the
addresses given for that Member on Exhibit A or such other address as that
Member may specify by notice to the other Members. A copy of any notice shall
simultaneously be provided (in accordance with the foregoing means) to counsel
designated by each of the Members on Exhibit B herefor or subsequently
designated in writing by a Member to the Board of Managers. Any notice, request,
or consent to the Company or the Board of Managers must be given to the Board of
Managers at the following address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Whenever any notice is required to be given by law, the
Certificate or this Agreement, a written waiver thereof signed by the Person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice.
13.3 Entire Agreement; Supersedure. This Agreement constitutes
the entire agreement of the Members and their Affiliates relating to the Company
and supersedes all prior contracts or agreements with respect to the Company,
whether oral or written.
13.4 Effect of Waiver or Consent. A waiver or consent, express
or implied, to or of any breach or default by any Person in the performance by
that Person of its obligations with respect to the Company is not a consent or
waiver to or of any other breach or default in the performance by that Person of
the same or any other obligations of that Person with respect to the Company.
Failure on the part of a Person to complain of any act of any Person or to
declare any Person in default with respect to the Company, irrespective of how
long that failure continues, does not constitute a waiver by that Person of its
rights with respect to that default until the applicable statute of limitations
period has run.
13.5 Amendment or Modification. This Agreement may be amended
or modified from time to time only by a written instrument executed and agreed
to by each of (i) the Members holding a majority of Membership Interests, (ii)
OCM and (iii) EXCO.
13.6 Binding Effect. This Agreement is binding on and inures
to the benefit of the Members and their respective heirs, legal representatives,
successors, and assigns.
13.7 Arbitration.
(a) Submission Requirement. Before the institution of
litigation between any persons relating to any aspect of the Company or this
Agreement, a party seeking redress hereunder or the interpretation of any
provision hereof shall submit the claim or issue for interpretation to binding
arbitration. The party submitting the claim or issue shall notify in writing the
party or other persons against whom redress is sought or who would be affected
by the interpretation, to offer those parties an opportunity to participate in
the proceeding. The notice shall describe the nature of the claim or issue
submitted, the provision or provisions of this Agreement which is or are the
basis of the claim or issue submitted, and the material facts surrounding the
claim or issue for interpretation. On delivery of the notice, the claim or issue
shall be deemed to have been submitted to arbitration.
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(b) Appointment of Arbitrators. Each party shall appoint one
arbitrator to arbitrate the subject issue. The arbitrators shall be appointed
within fifteen (15) days of the date of the foregoing described notice. If one
party fails or refuses to appoint an arbitrator, then the first arbitrator
appointed shall appoint a second arbitrator. Within thirty (30) days of the last
of those appointments, the two arbitrators shall appoint a third arbitrator. If
the two arbitrators are not able to agree on the appointment of a third
arbitrator, then the third arbitrator shall be appointed by a justice of a court
of competent jurisdiction in Los Angeles County, California. Each party
appointing an arbitrator or for whom an arbitrator is appointed shall bear all
costs and expenses associated with that arbitrator, and the cost and expenses
associated with the third arbitrator (or the appointment of the third
arbitrator) shall be borne equally by the parties.
(c) Arbitration Proceeding. Within thirty (30) days after the
appointment of the foregoing described arbitrators, the parties shall hold an
arbitration proceeding before the arbitrators at a time and place selected by
the parties. If the parties cannot agree on a time and place for the arbitration
proceeding, the rules of the American Arbitration Association shall govern.
(d) Binding Decision. Within ten (10) days after the
conclusion of the arbitration proceeding the arbitrators shall render a written
decision of the arbitration. The arbitrators may award costs, including
attorney's fees, to the prevailing party. The decision of the arbitrators is
binding on the parties, and after the completion of the arbitration, a party to
the arbitration may not institute litigation to reverse the decision of the
arbitrators. It may, however, institute litigation in Los Angeles County,
California, to enforce the claim or issue determined by the arbitration
proceeding. Once a claim or issue is submitted to arbitration, neither party may
institute litigation regarding the claim or issue submitted, except to enforce
that arbitration decision.
13.8 Governing Law; Venue; Severability. THIS AGREEMENT IS
GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
DELAWARE, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE
GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER
JURISDICTION. In the event of a direct conflict between the provisions of this
Agreement and (a) any provision of the Certificate, or (b) any mandatory
provision of the Delaware Act, the applicable provision of the Certificate or
the Delaware Act shall control. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision to other Persons or circumstances is not affected thereby and
that provision shall be enforced to the greatest extent permitted by law. Each
of the Members hereby consents to be subject to the nonexclusive jurisdiction of
the courts of the State of California located in the county of Los Angeles, and
to arbitration located exclusively in the county of Los Angeles, California.
13.9 Further Assurances. In connection with this Agreement and
the transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
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13.10 Waiver of Certain Rights. Each Member irrevocably waives
any right it may have to maintain any action for dissolution of the Company or
for partition of the property of the Company.
13.11 Notice to Members of Provisions of this Agreement. By
executing this Agreement each Member acknowledges that it has actual notice of
(a) all of the provisions of this Agreement, including, without limitation, the
restrictions on the transfer of Membership Interests set forth in Article III,
and (b) all of the provisions of the Certificate. Each Member hereby agrees that
this Agreement constitutes adequate notice of all such provisions, including,
without limitation, any notice requirement under Chapter 8 of the Delaware
Uniform Commercial Code, and each Member hereby waives any requirement that any
further notice thereunder be given.
13.12 Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if all signing parties had signed
the same document. All counterparts shall be construed together and constitute
the same instrument.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the undersigned, being all of the Members
of the Company, have executed this Agreement as of the date first set forth
above.
MEMBERS:
EXCO Resources, Inc., a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
OCM Principal Opportunities Fund, L.P.
By: Oaktree Capital Management, LLC, its
general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Principal
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
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EXHIBIT A
MEMBERS
Name & Address of Members Initial Contribution Sharing Ratio
------------------------- -------------------- -------------
CLASS A MEMBER(S):
OCM Principal Opportunities Fund, L.P. $657,596.59 95%
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CLASS B MEMBER(S):
EXCO Resources, Inc. $34,610.35 5%
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
A - 1
34
EXHIBIT B
COUNSEL DESIGNEES
If to OCM: Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to EXCO, a copy to: EXCO Resources, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.,
Secretary and General Counsel
B - 1
35
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
c/o Oaktree Capital Management, L.L.C.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
October 9, 1998
EXCO Resources, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: EXCO Energy Investors, L.L.C. Operating Agreement
Gentlemen:
As the two original Members of EXCO Energy Investors, L.L.C.,
a Delaware limited liability company (the "Company"), OCM Principal
Opportunities Fund, L.P. ("OCM") and EXCO Resources, Inc. ("EXCO") have entered
into a Limited Liability Company Agreement dated as of October 9, 1998 (the
"Operating Agreement") providing for the governance of the Company. In order to
establish certain additional terms that shall govern the management of the
Company (such terms being unique to the relationship between OCM and EXCO in
their capacities as the initial Members of the Company), we would like you to
confirm your agreement with the following additional provisions that shall
govern OCM and EXCO's management of the Company. Capitalized terms not otherwise
defined in this letter shall have the meaning assigned to such terms in the
Operating Agreement.
1. Irrespective of the provisions regarding approval by the Board
of Managers set forth in the Operating Agreement, the Managers
appointed to the Company's Board of Managers by OCM (the "OCM
Managers") hereby agree to obtain the prior consent of the
Manager appointed to the Company's Board of Managers by EXCO
(the "EXCO Manager"), prior to the Company's making of any
investment set forth in Section 2.4(a) of the Operating
Agreement, including any investment by the Company in any
asset, bond, note, bank debt, royalty interest or equity
securities.
2. If (x) the Company has cash in hand or on deposit in excess of
$2.5 million at any time for more than five (5) business days;
(y) the EXCO Manager requests that the Company distribute all
or a portion of such cash to the Members (the "Proposed
Distribution"); and (z) the OCM Managers reasonably determine
that sufficient cash will be retained by the Company following
such Proposed Distribution to fund anticipated operating
expenses, liabilities, reserves or capital requirements of the
Company and provided further that such Proposed Distribution
is then permitted by applicable law, then, as soon as
practicable thereafter, the Board of Managers shall vote on
whether to make such Proposed Distribution to the Members. In
connection with such vote, OCM hereby agrees to cause the OCM
Managers to vote in favor of the Proposed Distribution.
Notwithstanding the foregoing, nothing contained in this
paragraph shall in any way limit the right of OCM or the OCM
Managers to call a meeting of the Board of Managers or to
otherwise effect
36
distributions or cash or property at other times or of other
amounts without the consent or approval of EXCO or the EXCO
Manager. If any distribution is approved in accordance with
the foregoing sentences, then the Company shall be required
to distribute such cash or property to the Members in
accordance with Section 5.3 of the Operating Agreement.
3. Any additional Capital Contributions to be made by OCM and
EXCO shall remain proportional to each Member's Membership
Interest (for example, immediately following receipt of the
Initial Capital Contributions of both initial Members, OCM
shall fund 95% of all additional Capital Contributions and
EXCO shall fund 5% of all additional Capital Contributions,
until such time as such Members' Percentage Interests may be
adjusted from time to time in accordance with the terms of the
Operating Agreement), regardless of any change in the
percentages of distributions to be paid to the Members
pursuant to Section 5.3 of the Operating Agreement.
Notwithstanding the foregoing, the IRR realized by the Class A
Members shall be recalculated to give effect to such
additional Capital Contribution, and, if required by such
calculation, the priorities with respect to distributions set
forth in Section 5.3 of the Operating Agreement shall be
readjusted upon each such additional Capital Contribution to
give effect to such contribution.
[Signature page follows]
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37
Please confirm the foregoing understanding by signing and
returning the enclosed copy of this letter agreement.
Sincerely,
OCM Principal Opportunities Fund, L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Principal
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
Agreed and accepted as of the
date first set forth above:
EXCO RESOURCES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
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